Ingersoll Rand Pricing Spineometer: 5 of 5 Vertebrae

Ingersoll Rand, an air compressor company, had a strongly positive Q1 2023. Revenue rose 22% to $1.6 billion while earnings before interest and taxes rose 53% to $240 million over the same period last year.

According to management comments in the 3 May 2023 earnings call, many things went well for Ingersoll Rand and pricing was one of them.

CEO Vicente Reynal discussed Ingersoll Rand’s role in the rapidly evolving carbon capture market, the movement towards digitalization and the industrial internet of things (IIoT), and growing importance of the aftermarket business and service contracts.  The success of each of these initiatives is highly dependent upon Ingersoll Rand’s ability to engage pricing with new product development (NPD).

Management discussed the importance of demand generation, an area where transactional price management plays a fundamental role.

Management expressed their continued mergers and acquisition activities leading to greater business opportunities along two dimensions.  (1) These opportunities were apparent in the revenue growth derived from being able to configure customer offers across newly acquired products to meet evolving and increasingly pivotal customer needs, an area where pricing strategy and offering configuration meet. (2) The hypothesized belief and limited data supported the claim that greater price management by Ingersoll Rand can improve the margin capture of the newly acquired business lines.

CFO Vikram Kini even spoke to the role of pricing and the evolving economic environment stating: “It is worth noting here that obviously the pricing levels in the first quarter quite strong. … We took those [pricing] actions really either in advance or in concert with when we saw those inflationary levels rising in the first place. So … we would expect to continue to see good price/cost delivery, and the requisite margin expansion with it as we move to the balance of the year.”

Pricing engaged with product management, line-item sales management, customer management, business line management, and economic environment management implies we should find a robust pricing team at Ingersoll Rand.

Research into the quality of Ingersoll Rand’s pricing team yielded inspiring results.  Pricing professionals held titles of analyst, manager, and vice president.  Pricing professionals worked in multiple countries across the globe fit Ingersoll Rand’s market geographies.  Pricing professionals worked with product configuration, product management, marketing, sales management, and corporate strategy.

Given the importance and capability of pricing at Ingersoll Rand as indicated in financial reports, management comments, and our pricing team research, and given their performance, we have come to the following conclusion as of June ‘23.

Ingersoll Rand Pricing Spineometer:  5 out of 5 Vertebrae.

IR (Ingersoll Rand Inc.) rose from 57 on the day prior to their earnings call to 59 one week later. FY 2022 revenue of $5.9 B with a 14% operating margin and P/E ratio near 37.

Currently, a 1% improvement in price would yield a 7.2% improvement in EBIT holding all else constant for Ingersoll Rand.

Hear the latest Pricing Spineometer insights and commentary at the next Pricing and Profit Management Luncheon near you.  Visit wiglafpricing.com/events/ for more details.